The Next Reboot: Cold War, This Time With China

Today’s Agenda

• America could be on the verge of a new Cold War with China.
• Don’t sleep on Turkey contagion.
• Trump and Omarosa are kindred spirits.
• Trump’s undermining America’s Russia policy.
• Elon Musk didn’t have that funding, turns out. And he just took a big gamble with Tesla’s future.
• Wells Fargo isn’t all fixed yet.

Cold War II

(Bloomberg Opinion) -- President Donald Trump’s trade war with China might just be a temporary dust-up, ending when China throws him a bone that lets him declare victory and us get back to business as usual.

Or this could be the opening stages of a new Cold War between the U.S. and China, which will continue no matter who’s in the White House, suggests Conor Sen. One hint: China has an initiative called “Made in China 2025,” aiming to become the world’s dominant economy by the time President Ivanka Trump’s first term begins. This rivalry could realign American politics just as the Cold War with the Soviet Union did, Conor writes.

That one ended badly for the Soviets. And David Fickling suggests China is giving off a whiff of late-Soviet desperation with its other big initiative, the “Belt and Road” plan to spend about $1.5 trillion in infrastructure beyond its borders. It smacks of the Soviet Union’s Siberian buildup – a money pit that ultimately contributed to the USSR’s collapse, David writes.

As fraught as their relationship has been, both China and the U.S. have benefited from trading with each other and from China’s economic rise. No matter who “wins” this contest, both countries will lose a lot from their breakup, warns Michael Schuman.

Turkey Melt

The U.S. stock market today seemed to decide Turkey’s big sloppy meltdown was not such a big sloppy deal. But the ride’s not over, warns Mohamed El-Erian in a helpful survey of what led to Turkey’s crisis and the risks ahead: “Investors should brace for more volatility for the Turkish lira and bond spreads, as well as more technical contagion for other emerging markets.”

For the time being, despite the recent troubles of Turkey and other emerging markets, most Asian currencies are holding their own, notes Shuli Ren. The difference seems to be that they, unlike Turkish President Recep Tayyip Erdogan, accept the economic reality that they must raise interest rates to keep up with the rest of the world.

Given how far Erdogan has let the lira go – and what with his declaring economic war on the rest of the world – it will take much more than one or two rate hikes to save Turkey now, warns Marcus Ashworth. The big sloppy mess will continue.

Trump and Omarosa Were Made For Each Other

If you could take a time machine back to the year 2004, when Trump’s reality show “The Apprentice” was first on the air and scoring big ratings, you could have a lot of fun telling people about the year 2018: That show’s heel, Omarosa Manigualt Newman, is publicly feuding with Trump, who is the President of the United States. Good luck explaining what Twitter is. Back then, Trump “used to talk a lot about Omarosa” to Tim O’Brien, who was interviewing him for a book. Tim writes that Omarosa was a perfect fit for both reality TV and Trump’s orbit: “ She is just as craven and self-absorbed as he is, and betrayal by a kindred spirit has never sat well with him.” 

Bonus What-Is-Trump-Thinking Reading: A year after Charlottesville, Trump is still setting a terrible example on race, leaving the country divided and racists feeling more free to be publicly racist. – Tim O’Brien

When It Comes to Russia, Trump Isn’t Helping

Almost from the start of Trump’s presidency, there’s been a big gap between his praise of Vladimir Putin and the U.S. government’s aggressive steps to hold Russia accountable for stuff like invading countries and poisoning spies. It’s been easy to dismiss Trump’s words as just noise and believe the government’s actions are more meaningful. But Trump’s mixed signals matter too: Sort of like bad parenting, they undermine any punishment and make it more likely Russia will keep doing bad stuff, write Bloomberg’s editors. 

Bonus Russia-Adjacent Reading: Don’t cry for Peter Strzok, cry for the FBI’s independence. – Noah Feldman

Elon Musk’s Saudi Gamble

When Elon Musk tweeted he had “funding secured” to take Tesla Inc. private, he actually meant he had a super-warm feeling after talking to Saudi Arabia’s sovereign wealth fund about it, Musk wrote in a blog post today. This suggests no “funding” has actually been “secured,” in the way you or I or securities lawyers typically think about it, notes Matt Levine – who also points out Musk’s whole plan to go private, but with the same group of investors, makes no sense. Incidentally, Musk’s blog posts means he has given oil giant Saudi Arabia the power to crush his electric-car company’s stock, if it were so inclined, writes Liam Denning.

For the super-contrarian ( meaning bullish) view on Tesla, read Matt Winkler.

What Now, Wells Fargo?

Here’s more proof Wells Fargo & Co. still hasn’t cleaned up its culture: It is under investigation for misusing federal tax credits for low-income housing projects, according to this scoop by Stephen Gandel: “Based on the deals that have been examined so far, according to a person close to the investigation, Wells Fargo’s actions may have defrauded hundreds of millions of dollars from the federal tax program. And … a number of the people [who worked] on these deals are still working at Wells Fargo.” Click here to read the whole thing.

Chart Attack

The oil market needs to get its head around the fact that sanctions are going to take a huge bite out of Iranian oil production, warns Julian Lee.

The U.S. has turned into a major oil-producing power again, which changes how we should think about oil prices, writes Justin Fox.

Quick Hits

None of the big boys of tech – cough, Mark Zuckerberg and Jack Dorsey, cough – have any idea how to tame the beast they have created. – Cathy O’Neil 

A German drugmaker is trying to stop a U.S. execution using one of its drugs because it will be bad for its reputation. As cynical as that sounds, death-penalty opponents should welcome it. – Noah Feldman

Our auto-emissions standards may not be realistic. – Anjani Trivedi

Americans own less stuff, which makes us less loyal to capitalism. – Tyler Cowen

Stagnant wage-growth numbers don’t tell the whole story of America’s economy. – Ramesh Ponnuru

ICYMI

Silicon Valley unicorn founders have about $60 billion in paper money. Chris Collins isn’t running for reelection after all. The FBI fired Peter Strzok. 

Kickers

The underground lake on Mars could be home to some of our (very distant) cousins – or something much weirder. – Faye Flam

Meet the “Japan pig,” a recently discovered seahorse as big as a grain of rice.

People these days will do pretty much anything with goats.

There’s an upside to feeling blue.

Every Spike Lee film, ranked.

Note: Please send Japan pigs, suggestions and kicker ideas to Mark Gongloff at mgongloff1@bloomberg.net.

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To contact the editor responsible for this story: Timothy L. O'Brien at tobrien46@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Mark Gongloff is an editor with Bloomberg Opinion. He previously was a managing editor of Fortune.com, ran the Huffington Post's business and technology coverage, and was a columnist, reporter and editor for the Wall Street Journal.

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